The following interview is a conversation we had with Gabino Roche, CEO of Saphyre, on our podcast Category Visionaries. You can view the full episode here: $19 Million Raised to Digitize Pre-Trade Data and Activities Across Multiple Сounterparties
Gabino Roche
Hey, thanks for having me, Brett.
Brett
Yeah, no problem. So before we begin talking about what you’re building there at Sapphire, let’s start with a quick summary of who you are and a bit more about your background.
Gabino Roche
Oh, I’m a product guy by nature, so I’ve done development work and some testing work and business requirements. But it was at my time at McKinsey that I learned how to build technology products faster than the market. And then when I left McKinsey, I went to the New York Stock Exchange to help them build, fix engines. Fix is a protocol for buys and sells exchanges like the New York Stock Exchange. And then I worked at JPMorgan and their business operations. So not sitting in their technology departments, but sitting in their business operations to roll out technology solutions to support their clients. And then after helping JPMorgan revamp and reengineer some of their internal processes around client onboarding and KYC, I got an opportunity through them to help a consortium that was put together. This consortium was called Clarient. It was started by Goldman, State Street, Barclays, Credit Suisse, DTCC, along with JPMorgan, and it was supposed to be a utility for helping firms do their due diligence around knowing their customers.
Gabino Roche
KYC and we turned it around in six months with helping them with some of the development effort there and then wind up helping to sell the consortium to Thompson Reuters. And then as part of that deal, I was sold with that deal, so I couldn’t go back to JPMorgan. But that background. The reason why that background is important is that we learned what five of the street’s major banks were doing in this space, what their buy site clients, investment managers needed, and that actually what birthed the idea behind Sapphire and to.
Brett
Go back to the early days there a little bit. Did you know that you wanted to be a Founder at some point or did that just opportunity really come up for you?
Gabino Roche
Well, I’ve actually had two failed startups before, even while I was working full time jobs, and I had a mobile app business as well that kind of broke even. And so I’ve been dabbling and teaching myself the entrepreneurship journey, but with all the expertise that I gained from the experience in finance. I knew this was the idea to actually put 1000% effort behind it. So yes. But I guess the right opportunity presented itself with Sapphire makes sense.
Brett
And two questions we like to ask just to better understand what makes you tick. First one is what CEO do you admire the most and what do you admire the most about them?
Gabino Roche
So Steve Jobs, honestly, was the CEO. I kind of modeled the approach behind because it was product centric, story centric. And I always go back to how the ipod, not iPhone, right? But the ipod became a success. And there was a Microsoft Zoom that was developed at the same time. And the Microsoft zoom was an ipod audio. But not many people remember it today. But it actually had superior hardware, superior features. It was built by a bunch of tech geeks. But Steve Jobs team made it a fashion statement. So that’s why you remember in the first day, they would have silhouettes with white earbuds and everyone wanted to have the ipod. And it was a simple four buttons and a wheel to listen to music. And it was relatable to people. It was simple enough that people got it, and that’s why it was a success.
Gabino Roche
And that’s the whole process. How Apple’s actually rolled out a lot of their products. And the success to date is actually how do you roll out the minimal set of features that make sense. It creates a great experience, and that’s how you build really great product. It’s not necessarily making it too complicated.
Brett
I really can’t think of another company that’s better at product than Apple. Every single thing I’ve ever bought from Apple has just been amazing. From the AirPods, the AirPod Macs to the iPads, everything is just so good.
Gabino Roche
Yeah, that’s why also I stick with the MacBooks pretty much because they always last me. I’ve had a few PC laptops that never seem to last. But, yeah, I show your assessment there on Apple.
Brett
And what about books? Is there a specific book that’s really had a major impact on how you think as a Founder? And this can be a business book, or it could also just be a personal book that’s influenced how you view.
Gabino Roche
The world to come to mind? I would say the most important one. And this is funny. I read this at my days at Ups corporate logistic company. It’s called never eat alone. And it’s funny because when I took the opportunity with McKinsey, the New York office, I don’t know if it’s still there, but they had a library. And when you go to that library, to New York Office, there was one wall literally filled with that book. It’s an orange book, right? And they had one wall. Again, I know everyone’s out on Amazon looking up their Kindles for these books, but this is when physical books were still a big thing. And that really taught me about how to build relationships with people, how to build networks. By the time you read something in the newspaper or seeing it in the news, it’s old news. If you want to be on the inside track, if you want to understand what’s actually up and coming, it’s actually having conversations with people and talking about these ideas and understanding their motivations that really kind of turn the dial on things.
Gabino Roche
And that’s actually how we’ve been progressing with Sapphire and finding these opportunities. So, yeah, I think that book is key for every entrepreneur because if you’re just relying on the newspaper, the news, first of all, it’s filtered, you don’t get the inside story. And second of all, it’s old. It’s probably too old, especially in this fast moving space if you’re in technology. The other book I would just call out to mention for product folks to keep in mind, especially if you’re building a product, is Ready, Fire, aim. And those the aim is the last bit because it’s just getting started, but you’re perfecting your aim as you build things out, especially a product, to get it fit to purpose. So I’ll leave it at that.
Brett
That was, for a very long time one of our company’s core values. Ready. Fire. Aim. I read that like probably eight years ago and it was very impactful. So big fan of that book as well. Now let’s switch gears and talk about Sapphire. What’s the origin story behind Sapphire?
Gabino Roche
Well, I think I hit some of that on my background right when I was working at the consortium. And to help them deliver that solution. Social, again, was to be a utility for all the banks to do KYC due diligence. It was on the back of the 2008 financial crisis. A lot of the financial institutions needed to perform their due diligence to meet regulatory requirements. And what happens is all these banks came in, they brought in their best project managers and compliance people. The part that was missing in that consortium was understanding how to build a business, how to create incentives for the selfish interests of your clients to participate in such a utility. And the lesson I came out with this was, unless you can somehow tie this to revenue, you will never get adoption by firms to use a tool like this. You can talk about cost savings off the wazoo all you want, but if you can tie it to revenue, you can really make change.
Gabino Roche
And so I was pitching some of that idea. But again, remember when JPMorgan asked me to get involved to help assist and improve things with that consortium? It was struggling at the time and I think people just wanted a cleanup guy, a janitor of sorts, to kind of get the ship uprighted and then sold off with Thompson Reuters. But I was actually pitching the idea of bringing in a revenue generating model component into the business model in order to get it adopted. But everyone was sore from all the money that was spent, they didn’t want to entertain it. And so I decided to do it myself with my twin brother actually agreeing to be my first investor. He basically paid my salary because I was scared to take the risk, quite frankly, to do it. But I knew that if I didn’t do it, then in 2017, the moment would pass us by.
Gabino Roche
There’s some more behind it. I mean, I will say one more thing of the raise that you heard, sapphire was built with only 5.5 million total in five years. That would be unheard of, because if you know the budgets of these financial institutions, I mean, you’re talking easily tens of millions. There’s two occurrences. I can tell you about hundreds of millions that we spent a year just to build. But what Sapphire now does, and we do it in five years, right? It’s just unheard of. So that’s, again, thanks to a lot of the mentorship at McKinsey and how the products pass through the market. The division I work with, I think, is now called McKinsey Digital Labs. But again, that’s actually helped us tremendously and I think is an edge for us at Sapphire.
Brett
And if we focus now more on the product, how do your customers articulate the value and the benefits that they see once they adopt the product?
Gabino Roche
So I think I don’t want to bore your listeners on some of this, but I always break it down to each of these banks, these broker dealers, these custodians asset owners, investment managers. They have five departments, primarily in what we call the pre trade space. So if I was to separate finance into three silos, there’s your pre trade activities, your trading activities, and your post trade activities, where you debit and credit accounts. And the industry has focused their innovation on trading and post trade, and they’ve ignored pretrade as a cost of doing business. And I give credit to my twin brother. He uses analogy. But everyone wants to piece together the crashed plane to figure out what happened to cause the crash. And that’s the same thing with failed trades. It’s a crash trade you’re trying to piece together in post trade. But if you have the block box done in pretrade and you put the right security protocols up front, your trade is going to land where it needs to reach its destination.
Gabino Roche
It’s not going to crash. Right? And so the value proposition that a lot of our firms see is you do things correctly in pre trade. You don’t have to do all stuff in post trade. And in all these firms, they have like, five different departments in pretrade. Your onboarding team, your tax team, your KYC team, your legal and compliance team, your operational setup teams. And they all copy and paste, believe it or not. The same data and documents across all the departments in their respective different systems or vendor platforms. And what Sapphire does is actually create memory around this. You only do it one time. You understand the relationship between the parties and the departments, so you can actually piece the stuff later and do it all one time in post trade. And I’ll say one more thing, right? I’m sure in finance you’ve heard the term of T plus two.
Gabino Roche
It used to be T plus five. T plus two means two days after the trade, you can settle the trade. So if you want to buy Facebook shares, you won’t see those Facebook shares in your account for 48 hours till after the trade. Well, if you create memory around this stuff and you do it right the first time, you can actually settle on the same day you do the trade. You don’t have to wait 48 hours. Wow.
Brett
And what type of adoption are you seeing right now? Are there any metrics that you can share?
Gabino Roche
So the adoption is we’re hitting a snowball effect. We’re under NDA with a number of clients that we can’t name, but we have a plethora of press releases on our website. Right. So clearly it’s no secret Blackrocks done a press release with us. Franklin Templeton does one. Legal in general has done one. American Century. You have City, you have JPMorgan, you have BNP power Bus, bank of New York, Mellon. So we’re talking about the Creme de la Creme, top firms that are on the platform, northern Trust being another. And that’s just the ones that went public, right? That was that came to the closet. We have a whole bunch of others and more coming out in the new year, and it becomes a network play in this institutional finance space. It’s a relationship thing. So when you have a large investment manager that says, like, look, I want to settle my trades immediately, and I get a competitive advantage and I can start using those funds for new trades the next day.
Gabino Roche
I need you to go through Sapphire so that I know we have the speed and efficiency and you can win new money. It gets a lot of these broker dealers and custodians to say, yeah, okay, yeah, we’ll do that because it’s bringing us money in the door while at the same time giving us efficiencies internally so we don’t have to do this copy and paste exercise.
Brett
And what did you do to build trust with such large organizations? That’s obviously a challenge that all startups face, is getting the trust of customers to really give them a shot. Is there anything specific that you did or what did you do right to help build that trust?
Gabino Roche
Yeah, that’s an excellent question. So I always tell people you have to think about the adoption strategy in order to get the trust. So I had a mobile app business I mentioned before. It kind of broke even, and this is a real story. I had a client who wanted to build a supermarket delivery app, and I said, okay, great. Do you have relationships with supermarkets to sell their goods? No. Do you have relationships with the logistics companies to deliver your goods? No. I said, okay, well, then how do you expect a supermarket to pay for your service and clients to use this if you don’t have those relationships? And their answer to me is like, well, you’re a mobile app company. You do great designs. You’re going to build a beautiful design platform that they’ll just want to use it to make it happen. And the problem is that there’s nothing patentable there.
Gabino Roche
Now, Sapphire’s patents, that’s what makes it unique. But in this case, there weren’t any patents to protect. So you share that idea with the supermarket to say, well, we got our own tech budget. We can do this ourselves. We don’t need you. So I told the client, you want to be a coupon sharing app first. They were insulted, and I said, Hear me out. What you want to do is target one of your target supermarkets that you want to partner with. You stand in front of their store, you create a QR code. You head to people, say, hey, we got coupons that you can download, show the cash registers to save money, and we’ll even make recommendations on some of the meals that you can save money on for the week. And, yeah, you’re going to be scanning these coupons and doing it for a while.
Gabino Roche
It’s gorilla, but that’s what you have to do to build market share. Now, once you get about 50,000 of these customers in a region, you should approach the supermarket, tell them, hey, we’d like to get an API. We’re doing advertising, selling and whatnot. So we would like to save ourselves the cost of actually manually scanning your coupons. You sending this to us, they’ll probably say yes. And then once you get to about 100,000 of the customers using the app weekly, then you come back to them and give them the idea that you want to do this supermarket delivery app idea. And if they tell you no at that point, then you tell them, well, okay, we got 100,000 of your clients. Here we’ll go talk to your competitor. We’re sure they’re interested in these clients that we already have engaged over the last year working and using the platform.
Gabino Roche
Now, you build a compelling audience, right, a customer base that cannot be ignored. And so when I talk about trust, there is the actual product development aspect of it, of where you let people use the platform for free to validate the use case and to see the value. But you also have to think about how do you build a community that is so rapidly now dependent and wanting and relying on that exposure and experience that they will support you in getting those adoption deals that you need to close with clients, especially from a revenue.
Brett
Standpoint, makes a lot of sense. And as I’m sure you’ve experienced, going to market is not something that’s easy to do. What would you say has been the greatest challenge, and how did you overcome it?
Gabino Roche
The greatest challenge is when we are an unknown entity for people to trust you, especially with sensitive information and finance. So our strategy in the finance world was a little different, right? Quite frankly, we focused on a particular three different investment managers to start this. So BlackRock being one of the first. And as you know, BlackRock manages $10 trillion in assets, and so getting them as a converted client from the beginning easily gets momentum with the other tier one institution. So that was actually deliberate by Sapphire. So how we accelerate the growth of the company from an adoption standpoint, from a sales standpoint, from the product development standpoint, is in this case. We had focused our relationship with BlackRock and maybe two others that I left. Unnamed right now because we’re under NDA. And the idea here is to get them to use the product for free and to ask them to pilot.
Gabino Roche
So we don’t put any conditions around this. We have a working product and put it in front of them and say, hey, for the period of three to six months, why don’t we fulfill these use cases during the course of the three to six months? We’ll make additional configurations and enhancements to the software, and if it’s fit to purpose, then we can talk about what it means to actually roll this out live with the participants in the pilot and to potentially other clients. And that has been the standard approach that we’ve taken in how we’ve grown out the platform with all clients. But hopefully I answered your question there, Brett. You do.
Brett
And last couple of questions here for you. What excites you most about the work you get to do every day?
Gabino Roche
The thing that excites me the most is the deciphering of Egyptian hieroglyphics. It’s the whole Rosetta Stone story, right? I love demystifying some of these problems. So I got to be candid here. When I started working in finance, I thought I was working at companies that were working with technologies like the Google and Apple of the world. But in reality, there’s a lot of mainframes Windows 95 like old crap that’s being used. And you would think in finance, it’s heavily regulated, that things are standardized, but they’re not. I actually used to see buys and sells be bastardized coming in. And so one of the things we recovered in Sapphire is that we have to sweat the details, we have to suffer the details. And we’ve looked at all the data points, and I realized that one firm calls something tomato, another one calls it tomato.
Gabino Roche
I mean, literally, they’re fields. And once we have the epiphany of understanding, it’s the same field, it’s the same data, points. They’re just giving it different names that has left us to greater heights than ever before. So that’s what I mean by the Rosetta Stone. Demystifying and deciphering the nomenclature, the data points between firms and how we can actually prove out. You do this one time here, you don’t have to do it again over there. It’s the same thing. That’s been the exciting thing as we build out the product and clients are saying, wow, this is so much smarter. This is such out of the box thinking. This is why we want to use your platform.
Brett
I love it. And last question, if we zoom out into the future, what’s the five year vision for the company?
Gabino Roche
I think you’re going to see is the five year vision of the company is we are the middle office operating system in finance for institutional finance. So I always use this analogy. But if you think about the days in the 1980s when you use the PC, you would have used a different flappy disk to load Word versus PowerPoint versus Excel. And then when Windows came out, Microsoft Windows, you can actually launch three programs at the same time. Right, because Windows actually created a common layer to host all the basic information that you needed to run a computer to support those applications. It’s the same thing that Sapphire is doing in finance. It’s just that these firms don’t know it yet. They’re using us to onboard new accounts. They’re using us to manage some of the tax information and the KYC know your customer due diligence information.
Gabino Roche
But what’s really happening here is we are performing as a middle office operating system across multiple firms, not just bilaterally in the cloud. And this is going to change the nature of finance. It’s actually democratizing the data. And it’s the homework step. Without getting into too much detail, it’s the step that has to happen in order to make blockchain more ubiquitous.
Brett
Amazing. Well, that’s all we’re going to have time to cover for today. But before we wrap, if people want to follow along with your journey as you continue to build this company up, where’s the best place for them to go?
Gabino Roche
Definitely at www.sapphire.com. But I say LinkedIn is also where we get a ton of engagement, so be sure to follow our company page on LinkedIn. And then I would say Steven and myself have our own personal pages. We get a lot of engagement in there as well. Appreciate the time. Brett, thank you so much for having me.
Brett
Yeah, thanks for coming on and sharing your vision. This is all super exciting and look forward to seeing you execute on this vision.
Gabino Roche
All right, take care.
Brett
All right, keep in touch.
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